TWN Info Service on WTO and Trade Issues (Feb10/16)
27  February 2010
Third World Network

Australia, Brazil, Thailand voice concerns on EU sugar exports
Published in SUNS #6868 dated  22 February 2010

Geneva, 19 Feb (Kanaga Raja) -- Three major sugar producers and exporters  - Australia, Brazil and Thailand - have again voiced their serious  concerns over the recent decision of the European Union to authorize the  export of an additional 500,000 tonnes of out-of-quota sugar.

These concerns were voiced at a meeting of the WTO Dispute Settlement Body (DSB) on Thursday.

On 28 January, the EU announced a decision to increase its out-of-quota  sugar exports by half a million tonnes. It argued that this "temporary  measure", which it claimed fully respects the EU's international  obligations, was made possible by the "exceptional market conditions" at  both the EU and world level.

In a press release and subsequent press conference on 1 February, the  three countries had expressed concern that the increase in out-of-quota  exports by 500,000 tonnes means that the total out-of-quota sugar exports  by the EU may reach 1,850,000 tonnes in marketing year 2009/2010.

This amount would be 576,500 tonnes over the 1,273,500 tonne ceiling that is the EU's commitment under the WTO Agreement on Agriculture, they complained.(See SUNS #6855 dated 3 February 2010.)

In its statement at the DSB Thursday, Australia referred to the reports of  the panel and Appellate Body in the EC-Sugar dispute that was adopted by  the DSB on 19 May 2005.

According to Australia, the panel and Appellate Body in that dispute had  found that all sugar exported from the EU was in receipt of export  subsidies. As a result of that ruling, the EU was required - and undertook  - to reduce its subsidized sugar exports to its WTO scheduled commitment  limit of 1.2735 million tonnes.

In that context, Australia said that it is "extremely concerned" with the  EU's recent decision to authorize the export of an additional half a  million tonnes of out-of-quota sugar.

According to the Australian statement, the EU is now forecasting that it  will export almost 2 million tonnes of out-of-quota sugar in 2009/10.

Australia further said that this is a 146% increase over the 2008/09 export figures, and is significantly above the EU's export subsidy quantity commitment level.

According to Australia, this decision to increase exports is inconsistent with previous EU assurances that all out-of-quota sugar exports would be counted against the EU's WTO export subsidy commitment limits. It was also made without any consultation with the complainants in the EC-Sugar dispute, namely, Australia, Brazil and Thailand.

Australia said that the EU justifies its action by asserting that the  world price for sugar currently exceeds the EU's cost of production.

But, pointed out Australia, the EU has not released any data that would  enable WTO Members to make an assessment of the cost of producing sugar in  the EU.

Further, said Australia, the EU cannot simply take a snapshot of the  global and EU sugar markets at an opportune time and unilaterally decide  that it's no longer subsidizing its sugar exports. In any event, increased  EU exports can only negatively affect market sentiment and drive world  prices back down.

Australia noted that in Commission Regulation 94/2010, which announced the  additional exports, the Commission argued that "exceptionally favourable  weather conditions in 2009" have resulted in 500,000 tonnes of  out-of-quota sugar being available for export.

Yet, said Australia, the Commission's own figures forecast that beet  yields in 2009/10 will be only 3.9% higher than those in 2008/09. A 3.9%  increase in yield cannot justify a 146% increase in exports compared with  2008/09, it added.

Australia further noted that the Commission figures show that the EU held  stocks of 525,000 tonnes of out-of-quota sugar at the end of 2006/7;  693,000 tonnes at the end of 2007/8; and 412,000 tonnes at the end of  2008/09.

Yet the EU plans to have no out-of-quota sugar stocks at all at the end of  2009/10, said Australia, adding that it appears that the EU has again  taken the opportunity to dispose of its excess sugar production on the  world market.

It said that the Australian sugar industry has conveyed to the Australian  government its concerns about the EU's increased exports, and the signal  this will send to European producers.

Fully supporting Australia's statement, Brazil said that the EU's decision to put on the world market more than 500,000 tonnes of sugar in excess of the quantitative limits bound in the Uruguay Round is a cause of "serious concern" to Brazil.

It said that international markets have quickly computed the impact of the  additional sugar exports, and the sugar prices' previous upward trend was  reversed in late January, after the Commission recommended the EU's  Management Committee to authorize the exports.

Brazil said that the immediate economic prejudice suffered by its sugar exporters is estimated in the millions of dollars.

Highlighting the mid- to long-term implications of the EU's decision on  Brazilian producers, it further said that European sugar producers will be  stimulated to produce more surplus sugar in the following marketing years.

Second, added Brazil, markets will - in fact, already did - factor the EU's new policy of, under certain circumstances, export surplus sugar in excess of its WTO commitments in their future prices' expectations.

Brazil said that the EU has not provided it with evidence that its sugar exports no longer benefit from subsidies.

The mere assertion that sugar beet costs of production are circumstantially below out-of-quota sugar beet prices - or that sugar costs of production are likewise below international prices - falls far short of the EU's burden of establishing that its sugar regime now operates in such a fashion that European sugar exports do not enjoy artificial competitive advantages, it added.

In its statement, Thailand joined Australia and Brazil in expressing deep  disappointment at the EU's recent authorization of out-of-quota sugar  exports.

Thailand said that the EU has not provided concrete data in support of its assertion that "the export of out-of-quota sugar cannot be considered as being subsidized" as claimed in Regulation 94/2010.

Statements in the Regulation referencing "current economic conditions", the "most recent ... exceptionally favourable weather conditions" and "exceptionally high world market prices ... at this time" are not persuasive in light of Commission figures showing sugar over-stock of several hundred thousand tons per year from marketing year 2006/7 onwards, said Thailand.

Thailand expressed worry that Regulation 94/2010 signals to EU sugar producers that excess out-of-quota sugar can be exported, which could possibly lead to a continuous cycle of over-production and artificially depressed global prices.

It added that depressed sugar prices detrimentally affect the livelihood of 1.5 million farmers' and sugar workers' households, most of whom live in some of Thailand's lowest income areas.

The EU stressed that its decision to export 0.5 million tonnes of sugar is a temporary measure, adopted in view of the exceptional market conditions at both the EU and world level.

It said that world prices are at a record high level and there is a shortage of sugar which is affecting importing developing countries. It added that it does not expect these market conditions to last beyond the season 2009-2010.

The EU again claimed that the decision fully respects its international obligations - the quantities on sale are not subsidized. It said that the world sugar prices are at the moment higher than EU production costs and EU producers have become much more competitive following the drastic overhaul of the EU Common Market Organization for sugar.

To dispel the doubts of other WTO Members, the EU said that it is ready to provide any necessary technical information underpinning the EU's temporary decision to export sugar.

The DSB took note of the statements, according to trade officials.

In other actions, the DSB adopted the report of the panel in a dispute concerning US anti-dumping measures on polyethylene retail carrier bags from Thailand.

The DSB, in January, handed down a ruling holding that the US had acted inconsistently with its obligations under the Anti-Dumping Agreement in using the "zeroing" methodology to determine dumping margins. (See SUNS #6849 dated 26 January 2010.)

The DSB also sent to arbitration an EU Article 22.2 request for authorization to suspend the application to the US of concessions or other obligations under the covered agreements in its dispute with the US over US laws, regulations and methodology for calculating dumping margins ("zeroing").

The US had objected to the level of suspension sought by the EU. +